June 4, 2005

It's difficult to detect bogus ID

Once upon a time, real estate lawyers could assume with confidence that
the clients sitting in their office were actually who they said they were.

All that changed in 1996 when an Ontario court ruled that a lawyer was
negligent for failing to verify the identity of a woman in his office
pretending to be Saeko Yamada, before she signed a mortgage. The real Mrs.
Yamada knew nothing of the forgery.

The unlucky lawyer who failed to check the identity of the borrower got hit
with damages of $145,000 to pay off the forged mortgage.

That case sent shock waves through the real estate law community. Lawyers
were forced to ask all clients for proof of identity.

A similar shock wave hit several hundred lawyers attending a real estate law
summit in April when a fraud detective told them that every type of ID can
be forged.

The speaker with the scariest presentation at the event, sponsored by the
Law Society of Upper Canada, was detective Ben Hengeveld of the major fraud
bureau at York Region Police.

Forged ID, he explained, is based on a genuine document with altered
details. Counterfeit ID is completely bogus.

Social insurance cards are easy to counterfeit and cheap to purchase, said
Hengeveld. As a result, it is dangerous for lawyers to rely on them for
identification purposes. The same applies to the old-style Canadian
citizenship cards which have few security features.

Even Canadian passports despite all their security features are
vulnerable to alteration.

Ontario driver's licences are difficult to counterfeit, but easier to forge.
Hengeveld pointed out numerous security features on provincial licences
which separate the good from the bad cards.

Another problem for lawyers and other real estate industry stakeholders is
the proliferation of ID factories which produce anything from counterfeit
Ph.D. diplomas to passable driver's licences from every U.S. state and
Canadian province.

In order to test the quality of one of these factories, Benjy, my faithful
Lhasa Apso companion and office assistant, recently ordered a "novelty"
(translation: counterfeit) Ontario driver's licence for himself. The
realistic result shows his name, address, photograph, height (25 cm), sex,
and birthdate in September, 2000 along with a passable licence number.

The point of Benjy's little prank is that if he can parade around with a
realistic but counterfeit licence, so can many Ontario crooks whose
intentions are less honourable. Relying on a driver's licence for proof of
identity these days can be a risky proposition.

According to a Law Society report on mortgage fraud published in April, with
just one piece of phoney ID, a fraudster can engineer a title transfer to a
home without the knowledge of the owners. The new "owner" then arranges a
mortgage for half the real value of "his" property, and walks away with a
few hundred thousand dollars in proceeds from the counterfeit mortgage.

Losses to the provincial Land Titles Assurance Fund (paid for with taxpayer
dollars) and Ontario title insurance companies have run into the millions of
dollars in recent years.

Statistics published by Phonebusters, an anti-fraud call centre operated by
the RCMP, the Ontario Provincial Police, and the Competition Bureau, show
that in 2003, 5,772 people in Ontario alone reported being victims of
identity theft, to the tune of $12.6 million.

Homeowners who have been targets of identity theft and title fraud
eventually get their titles restored, but are often forced to spend tens of
thousands of dollars in legal fees to do so. While it is impossible to avoid
being the victim of title fraud, wise homeowners purchase title insurance to
cover the costs of having their titles restored.

TitlePLUS, Stewart Title and FCT Insurance all offer policies to protect
existing property owners who did not purchase title insurance when they
bought their homes.

Thanks to the education efforts of experts like Det. Hengeveld, industry
stakeholders are increasingly vigilant to the quality and security
protections in commonly used ID cards.

And one quick reminder: Obtaining or using phoney identity documents like
Benjy's driver's licence for a criminal purpose is an invitation to a
lengthy stay in a government pound.

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Bob Aaron is a Toronto real estate lawyer. He can be reached by e-mail at bob@aaron.ca,
phone 416-364-9366 or fax 416-364-3818. Visit
http://www.aaron.ca

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.